Written by : AK Agrawal
An experiences Chartered Accountant and Techno-Functional consultant working in industry for over 10 years dealing with multinational corporate clients. He is loves reading latest trend of technology trend.
Are you planning to do your next purchase via credit card or loan? Then it is vital to keep your credit score intact. A good credit score is what you need to make a smooth purchase. Despite this, due to financial crunches, you may have missed a few paybacks. If you are one among those, then it can impact your credit score. What makes it even worse is the journey to improve your score. It is not only strenuous but also can cost you a lump sum. So, here are some helpful tips to increase your credit score.
In short, a credit score is a 3-digit number that showcases your creditworthiness to a lender or a banker. Your credit history, the number of loans you have initiated, the credit card used by you, all matters, when it comes to calculating your credit score.
In India, there are mainly 3 credit information companies – CIBIL, Experian, and Equifax. The CIBIL is the credit bureau in India that generates reports on your credit score. It has a terminal effect on your loan or other credit-related financial products. Moreover, most lenders have started categorizing their customers based on their credit scores. Depending on the risk-based pricing, your credit score varies, and the higher the risk, the more interest you need to pay.
If you are intending to buy something using your credit cards, then it is crucial to have a good purchase. It not only increases your chance of facilitation but also manifests your potential as a buyer. Whereas, a low credit score is symbolic of your failure to make payments on time. It impacts most of your future purchases, as it causes trust issues between the lender and the customer. However, it is possible to get a loan in rare cases; but still, your credit limit will be too low. To get out of this hedge, you need to improve your credit score.
Keep reading to know different methods you can incorporate to enhance your credit score.
Before taking credit or a loan, your primary checklist should be your credit report. It is an indicator of your creditworthiness and is the foremost priority in calculating your credit score. Keeping track of your credit report will also help you identify any errors or mistakes that could cost you a loan. The Federal Trade Commission in 2012 found that 20% of customers have found errors on their credit report. A subsequent study also discovered that 20% of customers who reported errors are still not satisfied with the precision of their score. If you find some inconsistencies, then try to rectify them promptly. To make it easy, you can claim a report of your credit score every year, as credit bureaus are legally bound to provide you with one free credit report.
If you have any pending outstanding bills to complete, then it is important to complete any previous dues before initiating a new one. It can slightly raise your score, as your payment history will mention this transaction. Late payments can ruin your score, hence, try to be consistent while paying. You can keep payment alerts or auto debit facility to effortlessly pay your pending money. Try to complete as much as you can to make the outstanding amount within your pocket bracket. Apart from this, try to minimize your credit lines, as it can be risky, even though it will improve your credit profile. In case of hard inquiry, you will be assessed on how much risk you possess as a borrower, and this can lead to rejection of loan application.
Credit utilization is an important factor when considering credit scores. Increasing your credit limit will lower your credit utilization ratio and improve your credit score. Your credit utility shows your dependency on credit money, hence try to keep it below 30%. If you are employing the full potential of your credit limit, then you will be categorized as a high-risk borrower and it can negatively impact your credit score. As a wise borrower, you can reduce credit utilization by approaching lenders that accept multiple credit payments in a month.
If your score falls harshly, then you might not be planning your credits well. Credit can be helpful if you use it wisely. If you haven’t opted for a credit loan before, then your credit score will be less in comparison and will be difficult for you to obtain a new loan. Also, applying for an unplanned loan can bring unexpected liabilities. To avoid this, you can apply for different types of credit that include a mix of personal and secured loans. You can also apply for long and short term credit to have an attractive profile. Having more credit cards and heaping purchases can be counterproductive. Applying for a credit card can be a cost-effective way of purchasing high-value products. When you are attempting to try it out, choose lenders that have a high approval rate. Applying for credit cards from various sources will reduce your chance of approval and impact your credit score.
It is not possible to enhance your credit score within a short time span. Only making on-time payments can boost your score. Apart from this, you can also try to reduce your credit claims and attempt to pay all your due in time.
Do you want to boost your credit score? Are you looking forward to having a positive credit history? Then it is vital to consult a professional to get an expert opinion on your prevailing credit score. Gotaxfile is the perfect avenue to get external help on boosting your profile. We have experienced professionals who have industry knowledge in various fields. They help you effectively utilize and employ your credit usage in a profitable way. Contact us to know more!
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